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This is not as complicated as it
sounds - it is in your name, but designated as belonging to the child.
You need two forms of identity to prove who you are and where you live,
such as your passport, driving licence, ID card or benefit book.

You must also produce a household bill less than three months old as proof of your address. You will also need the child’s birth certificate.

The over-sevens can usually open the
account in their own name and will need their passport or birth
certificate, plus a household bill showing their parent or guardian’s
address.

Fill in form R85, available from
branches, on opening an account so that interest is paid without tax
being deducted. Children have a personal tax allowance - £8,105 for this
tax year - which they can earn before paying tax.

But there is a catch to prevent parents from handing over too much money simply to reduce their own tax bill.

Children can earn only £100 a year in taxable interest from money given to them by each parent.

Any more and the whole lot, not just
the sum over £100, is taxed at their parents’ highest rate of tax. At
3 per cent, £3,300 in an account for a year would earn £99 in interest.

For longer-term savings, you can top up their Junior Isa where the interest is automatically tax free.

Anyone can pay money in - parents,
grandparents, other family members and friends - but the money is tied
up until the child reaches 18.

But only parents or a guardian with parental responsibility can open a Junior Isa for under-16s.

This tax year - which runs to April 6 - the overall limit that can go into an account is £3,600.

Top deals include Coventry BS at 3.25 per cent. Nationwide also pays 3.25 per cent but only to January 2014 when the rate falls to 2.15 per cent.